DPCM Capital CEO Emil Michael says Apple’s privacy changes are continuing to put pressure on both social media platforms and small businesses alike.
In April 2021, Apple released its privacy tracking feature, App Tracking Transparency, which shifted Apple’s default from automatically allowing third parties to track users to putting the power in users’ hands and letting them decide whether or not to switch on the option. In case anyone missed the diss, Apple followed up their first act with a tongue-in-cheek May 2022 commercial that read: “Your data is being sold. Privacy. That’s iPhone” as CEO Tim Cook tweeted: “You should be in control of your data — not the highest bidder.”
Well, that has had a cataclysmic effect on ad dollars for major social media giants like Facebook and Snap. In February 2022, Meta, Facebook’s parent company, blamed Apple for a historically bad quarter and said the company is projected to lose $10 billion by year-end.
On Aug. 30, Snap — the parent company of social media platform juggernaut Snapchat — announced it will restructure and lay off 20% of its workforce. With ad tracking from Apple off the table, Snap isn’t the only social media network feeling the pressure, as Emil Michael discussed during an Aug. 31 sitdown with anchor Nicole Petallides on the TD Ameritrade Network.
“Apple’s privacy changes made it much more difficult to have these companies that rely on ad-based revenue models get high prices for their ads because they’re less targeted,” says Emil Michael.
The change has had a ripple effect on other companies such as Twitter and Pinterest and even small- and medium-size companies that rely on data culled from the tracking feature to market their products to potential and current customers alike, notes Michael.
Michael also pointed out that Apple is profiting from the change ahead of launching its own advertising product “that’s growing extremely fast [meanwhile] the advertising market for its competitors is declining.”
Apple says data sharing has become a $227 billion-a-year industry, and hundreds of data brokers are harvesting online and offline data, reporting one broker garnering material on more than 700 million consumers around the globe.
More Trouble for Snap
Apple’s privacy change isn’t the only obstacle for Snap.
“The second factor, and this is more for Snap in particular, is the rise of TikTok and the rise of YouTube Shorts,” says Michael. “I don’t know if enough people are paying attention to YouTube Shorts, [which had] 1.6 billion viewers last month. It came out of nowhere to compete with TikTok. They’re just taking the attention of people away from these other apps because you only have so many hours in a day to use these social media apps. Those are the two big trends I see here.”
With Snap laying off 20% of its workforce and restructuring, Petallides pointed out that Meta’s stock surged. But Michael explained why he wasn’t hitting “like” just yet.
“There’s a little disconnect between Snap and what’s happening at Meta because Meta is down still 50% year over year. It peaked at almost $400 a share, and now it’s about $160 [as of Aug. 31]. So any recovery that you see at Meta for a couple dollars each day on its stock price is not necessarily tied to Snap, because the balance sheet that Facebook has means they don’t have to do layoffs,” Emil Michael says. “Snap is much, much smaller with a smaller balance sheet, so 20% head count for them is a real cost savings when your revenue is not growing as fast as you wanted it to. So there’s somewhat of a disconnect there, and I also think Meta has started to succeed in having Instagram be a commerce center where you can buy things, where Snap is not quite all the way there yet.”
Emil Michael Addresses Apple’s Privacy Changes
Emil Michael explains the developments in layman’s terms.
“I think the simple way to understand the Apple changes is they turned off the default,” he says. “The default used to be that these companies you did business with, like Snap and Twitter, could track you and collect data from you. Then when they advertise to you, they use that data, and the advertising is targeted.
“You’re much more likely to buy, which has made the ads more valuable. Now, the default is that tracking is off and you have to actually turn it on,” Emil Michael says. “And that one change changes dramatically the advertising market for these other companies and a lot of small businesses that rely on internet ads to get customers as well — and I don’t think that’s going to change.”
When it comes to whether people will actually opt in on their devices to be tracked and receive more ads, Michael says it boils downs to two competing forces.
“I think in one sense, you’re going to get advertising no matter what. The question is whether the advertising is relevant or not. So do you want relevant advertising or irrelevant advertising?” Emil Michael asks. “However, there are other things we don’t want to be tracked with: our location, what our family history is, what our medical history is.
“So I think there are categories that are a clear ‘no’ but there are categories that if you thought about it and are a little subtle about it, you might think ‘Well, I just had a baby and I’m shopping for kids’ furniture and I want to be advertised deals that I can access because of that.’”
Emil Michael’s Advice for Businesses in Light of Apple’s Privacy Change
To promote growth for businesses with social media, Emil Michael suggests implementing a clear strategy.
“Let’s say you have a storefront on Shopify and you make your business by finding customers and you’re a small business and your only way to reach [customers] is through search ads or display ads. This change potentially hurts you pretty dramatically,” Emil Michael says. “And that’s the small guy. The bigger guys and gals have their own ecosystem, so you can spend a lot of time on Snap and Snap can have that data and they can at least be somewhat targeted in what they sell you.
“So if you’re a small business, I think you really have to figure out other ways to get customers cheaply and if you don’t do that, it’s going to be a problem,” Emil Michael adds. “If you’re midsize like Snap is, you have to figure out how to bring people into your ecosystem and keep them there so you can serve ads to them. And it’s the same thing with YouTube Shorts. It really depends on how big you are as a company.”